Private
community restrictions on property transfer deserve closer scrutiny by
the courts because they often conflict with public policy objectives and
unjustifiably compromise owners’ property rights. Covenants that run
with the land are a strange legal hybrid, neither completely contract
nor solely property. As servitudes, they are specifically enforceable
and bind subsequent owners of the property in perpetuity. In common
interest communities, these covenants further diverge from traditional
contracts in being adhesive and non-negotiable conditions bundled into
home acquisition. Their terms are prescribed by developers and lenders,
not by community members themselves. Yet courts typically uphold
transfer restraints in covenants based on freedom of contract principles
without fully vetting implications for property rights and market
efficiency.

Common interest community restrictions on transfer
are poor cases for reflexive enforcement based on principles of
contractual freedom. Relying upon the common law prohibition of undue
restraints on alienation would enable courts to better balance actual
costs and benefits. Free alienability preserves owner autonomy,
stimulates market efficiency and avoids adverse disparate impacts on
minority groups and other collateral societal harms. Legitimate
neighborhood concerns regarding maintenance and behavior are better
directly controlled through community use regulations than through
alienation restraints. Analyzing community covenant alienation
restrictions through the lens of property, not contract, is the superior
approach to balancing community interests.